Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Industrial Policy: Lessons from Shipbuilding
Journal of Economic Perspectives
vol. 38,
no. 4, Fall 2024
(pp. 55–80)
(Complimentary)
Abstract
Industrial policy has been used throughout history in some form or other by most countries. Yet, it remains one of the most contentious issues among policy makers and economists alike. In part, this is because the empirical evidence on whether and how it should be implemented remains slim. Scant data on government subsidies, conflicting theoretical arguments, and the need to account for governments' short and long-run objectives, render research particularly challenging. In this article, we outline a theory-based empirical methodology that relies on estimating an industry equilibrium model to measure hidden subsidies, assess their welfare consequences for the domestic and global economy, as well as evaluate the effectiveness of different policy designs. We illustrate this approach using the global shipbuilding industry as a prototypical example of an industry targeted by industrial policy, especially in periods of heavy industrialization. Just in the past century, Europe, followed by Japan, then South Korea, and more recently China, developed national shipbuilding programs to propel their firms to global leaders. Success has been mixed across programs, certainly by welfare metrics, and sometimes even by growth metrics. We use our methodology on China to dissect the impact of such programs, what made them more or less successful, and how we can justify why governments have chosen shipbuilding as a target.Citation
Barwick, Panle Jia, Myrto Kalouptsidi, and Nahim Bin Zahur. 2024. "Industrial Policy: Lessons from Shipbuilding." Journal of Economic Perspectives, 38 (4): 55–80. DOI: 10.1257/jep.38.4.55Additional Materials
JEL Classification
- L52 Industrial Policy; Sectoral Planning Methods
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- N60 Economic History: Manufacturing and Construction: General, International, or Comparative
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O25 Industrial Policy
- P23 Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population
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